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TEXAS PUBLIC POLICY FOUNDATION Policy Perspective August 2017 Center for Economic Freedom Rightly Managing the

TEXAS PUBLIC POLICY FOUNDATION

PolicyPerspective

August 2017

Center for Economic Freedom

Rightly Managing the Municipal Right of Way?

by Olivia Krog

Research Assistant

Bill Peacock

Director, Center for Economic Freedom Vice President, Research

Key Points

Texas municipalities levied more than $543 million in right of way fees in 2017.

Between 2008 and 2017, over $5.1 billion in fees has been taken from Texans and spent largely on projects unrelated to maintaining the right of way.

The right of way fee does not beneft local citizens; instead it benefts local government ofcials and special interests by adding signifcant costs to consumers.

What do you call a charge for one service frequently used to pay for something com- pletely diferent? For the municipal governments of Texas, that would be the municipal right of way fee, which bears a striking resemblance to a tax.

According to the Public Utility Commission of Texas, the “right of way” is defned as the “area on, below, or above a public roadway, highway, street, public sidewalk, alley, waterway, or utility easement in which the municipality has an interest” (Public Utility Commission of Texas). In other words, the local government is charging citizens for the use of their own property whether it is employed for electric, telecommunications, gas, or other service lines.

For quite some time, many municipal governments have gathered tens of millions of dollars per year in the name of providing these services to their constituents. Since

2008, over $5.1 billion in right of way fees (also known as franchise fees) have been

levied against the people of Texas. In Houston alone, the total was expected to surpass $185 million in FY 2017.

Te metaphor used to describe right of way fees by those that levy them is “rent” paid for space under or above ground where service lines are installed (Texas Municipal League). However, Sec. 283.001 of Texas’ Local Government Code states that right of

way fees are to be “consistent with the burdens on municipalities created by the in- cursion of certifcated telecommunications providers into a public right-of-way” and provide “fair and reasonable compensation for the use of a public right-of-way.” When municipalities have charged residents to use lines running through either their own property or property owned collectively by themselves and their neighbors, and the money is used for projects unrelated to the cost of managing the rights of way, then

Table 1: Right of way fees collected by Texas’ 10 largest cities (2008-2017)

                     

Total 2008-

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2017

Houston

$183,153,695

$184,221,688

$183,858,504

$184,410,797

$186,643,531

$189,030,298

$183,443,845

$182,482,306

$186,633,388

$185,222,635

$1,849,100,687

San Antonio

$28,386,813

$29,299,815

$28,976,795

$28,100,000

$29,539,419

$29,656,534

$30,045,328

$32,977,929

$31,949,513

$31,554,998

$300,487,144

Dallas

$103,823,134

$100,074,542

$90,999,559

$102,352,196

$102,475,420

$103,604,847

$104,541,298

$104,460,800

$104,316,937

$108,517,391

$1,025,166,124

Austin

$32,838,832

$30,850,800

$32,513,604

$30,517,389

$30,289,277

$31,152,211

$33,421,211

$34,221,758

$34,716,000

$33,187,000

$323,708,082

Fort Worth

$39,715,763

$38,390,140

$39,787,303

$44,966,726

$41,376,609

$43,933,111

$45,947,016

$47,461,691

$45,460,014

$44,893,608

$431,931,981

El Paso

$40,122,253

$43,815,255

$41,285,513

$48,980,745

$48,645,835

$47,112,246

$47,430,115

$52,752,159

$53,661,247

$57,144,610

$480,949,978

Arlington

$28,925,283

$28,293,626

$30,369,380

$32,702,318

$30,618,948

$30,430,911

$32,006,202

$31,824,946

$31,688,955

$34,019,814

$310,880,383

Corpus Christi

$17,272,515

$16,071,288

$17,054,727

$16,970,857

$16,576,842

$17,406,612

$20,017,765

$17,227,587

$17,073,956

$18,092,744

$173,764,893

Plano

$22,628,847

$23,586,444

$21,886,667

$22,770,635

$21,895,025

$22,455,606

$23,469,220

$24,643,020

$25,407,682

$23,755,531

$232,498,677

Laredo

$6,478,582

$6,499,106

$6,387,908

$6,707,418

$6,785,388

$6,739,515

$7,114,403

$7,231,329

$7,255,403

$7,036,290

$68,235,342

TOTAL

$503,345,717

$501,102,704

$493,119,960

$518,479,081

$514,846,294

$521,521,891

$527,436,403

$535,283,525

$538,163,095

$543,424,621

$5,196,723,291

Source: Online Municipal Budgets

continued

Rightly Managing the Municipal Right of Way?

August 2017

Figure 1. Right of way fees for the 10 largest cities in Texas (2008-2017)

of way fees for the 10 largest cities in Texas (2008-2017) Source: Online Municipal Budgets the

Source: Online Municipal Budgets

the billions of dollars accumulated in right of way fees over the past 10 years far exceeds what is “consistent with the bur- dens” and “fair and reasonable compensation.”

In reality, the vast majority of the funds are not applied to- ward management of the rights of way at all. Rather, most of the fees are deposited in a general fund and then re-routed toward a plethora of unrelated projects.

In Plano, right of way fees over the past 10 years have amounted to $232,498,677. Te budget for fscal year 2016- 17 named three primary sources of revenue for the city of Plano’s General Fund: property taxes, sales taxes, and all

other revenues. Franchise fees make up part of the “all other revenues” category. As displayed in Table 1, franchise fees collected in Plano in 2017 amounted to $23,755,531.

Where were these general revenue funds spent? Some were spent on creating “an additional eighty-six (86) new full-time positions and two (2) part-time positions” for the city, as well as on projects “to allow for the placement of two treadmills and the addition of two stationary bikes for the gym” at the Plano-Richardson Training Center and a “Kennel Attendant in the Animal Services Department” (Ofce of the City Manager).

Figure 2. Right of way fees for the 10 largest cities in Texas (2008-2017)

Cumulative Right of Way Fees For the Ten Largest Cities

(2008-2017)

$550,000,000

$540,000,000

$530,000,000

$520,000,000

$510,000,000

$500,000,000

$490,000,000

$480,000,000

$470,000,000

$460,000,000

$490,000,000 $480,000,000 $470,000,000 $460,000,000 Cumulative Right of Way Fees For the Ten Largest Cities
$490,000,000 $480,000,000 $470,000,000 $460,000,000 Cumulative Right of Way Fees For the Ten Largest Cities

Cumulative Right of Way Fees For the Ten Largest Cities (2008-

2017)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Online Municipal Budgets

August 2017

Rightly Managing the Municipal Right of Way

Over the last fve years, the cumulative fgure for right of way fees gathered across the state has steadily increased, ris- ing from $514,846,294 in 2012 to $543,424, 621 in 2017. Te trend is unlikely to change anytime soon. While Sec. 283.055 of Texas’ Local Government Code states that “On an annual basis, an afected municipality may provide notice to the commission to decline all or any portion of any increase in the per category across line rates,” this option has been unde- rutilized, resulting in the rising costs displayed in Table 1.

A fee appropriately imposed will charge benefciaries for a good or service that provides utility and, in turn, allocate the

References

funds generated toward the payment for that service. Tis fee fails to do so.

In a time when citizens are facing the increasing “Californi- azation of Texas” on multiple fronts as local municipalities seek to exact and expand regulations in cities across the state, it begs the question: is this what Texas is about (Fikac and Baugh)? Te Texas model, established on free enterprise, economic prosperity, and the individual liberty that forged the foundation of the state, invariably stands for something more.

of the state, invariably stands for something more. Fikac, Peggy, and Josh Baugh. 2015. “Abbott: City

Fikac, Peggy, and Josh Baugh. 2015. “Abbott: City regulations on trees, bags, fracking ‘California-ize’ Texas.” San Antonio Ex- press-News, January 8. Last updated January 9, 2015.

Martinez-Gouhier, Carine, and Bill Peacock. 2014. Municipal Franchise Fees: Why Are Consumers Paying Millions Every Year? Texas Public Policy Foundation.

Ofce of the City Manager. 2016. Program of Service, City of Plano 2016-17. City of Plano.

PUC (Public Utility Commission of Texas). 2017. “Municipal Right of Way.” Accessed June 26.

Texas Municipal League. 2010. “FCC Preemption of Local Right-of-Way Rental Fees?” Accessed July 28, 2017.

Olivia Krog is a research assistant for the Center for Economic Free Foundation.

Bill Peacock is the vice president of research and director of the Te Center for Economic Freedom. He has been with the Foundation sin extensive experience in Texas government and policy on a variety o and regulatory policy, natural resources, public fnance, and public e on identifying and reducing the harmful e fects of regulations on th consumers.

Prior to joining the Foundation, Bill served as the Deputy Commissi Commissioner Jerry Patterson at the Texas General Land O f ce. Befo was a legislative and media consultant, working with groups like Cit and Putting Children First. Bill also served as the Deputy Assistant Commissioner for I Commissioner Rick Perry at the Texas Department of Agriculture, as a legislative aide t Texas House of Representatives, and as an analyst for the Texas Senate Committee on

and as an analyst for the Texas Senate Committee on About the Texas Public Policy Foundation
and as an analyst for the Texas Senate Committee on About the Texas Public Policy Foundation

About the Texas Public Policy Foundation

The Texas Public Policy Foundation is a 501(c)3 non-pro ft, non-partisan resear mission is to promote and defend liberty, personal responsibility, and free ent nation by educating and a fecting policymakers and the Texas public policy d sound research and outreach.

Funded by thousands of individuals, foundations, and corporations, the Foun government funds or contributions to in f uence the outcomes of its research.

The public is demanding a diferent direction for their government, and the T is providing the ideas that enable policymakers to chart that new course.

erent direction for their government, and the T is providing the ideas that enable policymakers to